Universal Orlando ponders how to take full advantage of Wizarding World's popularity

Celebrities at the Wizarding World of Harry Potter

Universal Orlando

Academy award-winning actors Michael Douglas and wife Catherine Zeta-Jones along with their children Dylan, 10, and Carys, 7, flew over The Wizarding World of Harry Potter and past Hogwarts Castle while riding Flight of the Hippogriff at Universal Orlando Resort on November 27, 2010. Fans of the Harry Potter books and films, the family also sampled Butterbeer, got fitted for wands at Ollivanders and toured Hogwarts Castle while on vacation at Universal Orlando over the Thanksgiving holiday. The Wizarding World of Harry Potter is the most spectacularly-themed entertainment experience ever created that was inspired by J.K. Rowlings compelling stories and characters.

Academy award-winning actors Michael Douglas and wife Catherine Zeta-Jones along with their children Dylan, 10, and Carys, 7, flew over The Wizarding World of Harry Potter and past Hogwarts Castle while riding Flight of the Hippogriff at Universal Orlando Resort on November 27, 2010. Fans of the Harry Potter books and films, the family also sampled Butterbeer, got fitted for wands at Ollivanders and toured Hogwarts Castle while on vacation at Universal Orlando over the Thanksgiving holiday. The Wizarding World of Harry Potter is the most spectacularly-themed entertainment experience ever created that was inspired by J.K. Rowlings compelling stories and characters. (Universal Orlando)

Jason Garcia, Orlando Sentinel

When "60 Minutes" profiled Facebook founder Mark Zuckerberg earlier this month, the TV piece included a look at some of Zuckerberg's personal posts online. They showed that the 26-year-old billionaire, whose website has more than 500 million users, had recently been in Orlando — visiting the Wizarding World of Harry Potter.

It was yet another jolt of publicity for Universal Orlando, which has been basking in a global spotlight since Wizarding World's formal opening in mid-June. The rides, shops and eateries themed around J.K. Rowling's beloved boy wizard have triggered a renaissance at Universal this year, snapping an extended slump and powering the resort to the strongest performance in its 20-year history.

But now, as it concludes 2010 and prepares for a new year, Universal faces a new challenge: keeping Potter's magic alive. Already, resort executives are wrestling with questions such as when to expand Wizarding World and how to keep business balanced between Islands and Universal Studios Florida — the park without Potter.

Experts say how Universal answers such questions will ultimately determine whether it is able to hold on to the gains it has made this year.

"The challenge will be to create a continuous buzz," said Abe Pizam, dean of the University of Central Florida's Rosen College of Hospitality Management. "It's difficult to maintain the high level of [initial] interest. You have to create buzz on a regular basis."

36% attendance jump

It is difficult to overstate how dramatic Universal's turnaround has been. Last Christmas, Orlando's No. 2 theme-park resort was limping to the end of a year in which attendance tumbled by 1.3 million people to 9.3 million — its first year with fewer than 10 million visitors since Islands of Adventure opened in 1999.

This year's yuletide is far merrier. Attendance for the third quarter — which began days after Wizarding World formally opened June 18 — skyrocketed 36 percent, as Universal drew an extra 1 million people in just three months. It has continued to climb through the fall.

"I can't remember the last time anyone saw a 36 percent increase in attendance," said Dennis Speigel, president of International Theme Park Services, a Cincinnati consultancy.

Wizarding World's effect has been even more pronounced in areas beyond attendance. Universal's merchandise revenue more than doubled to $48.7 million, fueled by sales of magic wands and other Potter souvenirs. Food-and-beverage sales jumped 59 percent to $43.4 million on the popularity of butterbeer. And non-theme-park revenue rose 61 percent to $48.2 million, thanks primarily to sales of vacation packages through Universal's travel unit that offered early entry to Wizarding World.

The resort's CityWalk nightlife district has benefitted, as well. When " Harry Potter and the Deathly Hallows Part 1" arrived in theaters last month, Universal scheduled midnight shows on all 20 screens in CityWalk's movie megaplex. The resort said every showing sold out.

Universal has had to make adjustments on the fly to manage the crowds. The resort has at times distributed to guests receipts with return times just to enter the Wizarding World section of Islands of Adventure. Inside, it halted sales of liquor over the summer so workers in the "Hog's Head" tavern could more quickly fill mugs of butterbeer.

It has faced some complaints. Some fans, for instance, have criticized the small size of Wizarding World's shops, where long lines routinely spill outside. And some experts say the limited capacity has likely cost Universal sales as frustrated guests forgo purchases.

"The undersizing was a major issue," Speigel said. "It cost them money."

But Universal executives, who call the shops "retail theater," said they were designed to look just as they are described in the Potter books and appear in Potter movies. The authenticity, they say, is what has made Wizarding World so popular in the first place.

"That's how crowded it is; that's how chaotic it is [in the books and movies]. I think that is what helps to create the demand," said John Sprouls, Universal's chief executive officer. "I don't think we have any concerns about leaving revenue on the table."

Add to Universal Studios?

Few, if any, experts expect the frenzy to subside in the immediate future.

John Puchalla, an analyst with Moody's Investors Service, predicts Universal's attendance will continue climbing by 15 percent or more through the first half of 2011. He expects it will turn slightly negative in the second half of the year — but only because Universal will be facing tough comparisons against this year's grand-opening crowds.

"We believe the attendance lift generated from the June 2010 opening of [Wizarding World] will continue for the next several years," Puchalla wrote in a research note last month.

Still, amid all the attention being paid to Potter and Islands of Adventure, Universal is taking steps to prop up Universal Studios, which is the resort's original theme park and was, until Wizarding World opened, its busiest. The resort's lowest-priced annual passes for 2011 prohibit entry to Islands of Adventure over the summer — but permit admission to Universal Studios.

Executives have also begun discussing how and when to add to Wizarding World. Among the debates: whether to add something more to Universal Studios first.

Puchalla expects Universal to spend about $80 million on construction in 2011. Though that would be significantly less than the $105 million a year it averaged from 2007 to 2010 — when it built Wizarding World in Islands and Hollywood Rip Ride Rockit and The Simpsons Ride in Universal Studios — it would still be about twice the annual capital spending that Universal averaged during the middle part of the decade.

Although they won't discuss specific plans, Universal executives say additions to Wizarding World will happen at some point. The resort's licensing contract with Warner Bros. requires it to incorporate elements from the final Potter films, the last of which will open in theaters in July.

"We intend to very gladly live up to all those commitments," Sprouls said.